191–200 of 200 posts
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Oh man, nobody should ever use Stripe Atlas.
I'm interested to hear why?
Not sure if this is what was being referred to above though.
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That is not what insolvent means though. There is a difference in not being able to pay back depositors bc you gambled it away on magic beans vs it’s tied up in safe bonds. In both situations you can’t satisfy depositors immediately, but they’re otherwise very different. For one thing, people buy companies that are insolvent, eg svb, they don’t buy magic bean farms, eg ftx.
The money is not tied up in bonds. Because those bonds are liquid and can be sold on the market in exchange for dollars. And when depositors ask for their money the bank is forced to sell those bonds at a big loss to get dollars. That results in assets < liabilities. Which is insolvency.
I work at a bank most people are trying to park their funds at. It is a fucking PANIC mode disaster for them. Large companies in the Valley are trying to dump 100's of millions into our accounts
Can you explain, with a focus on how banks and money movements work, why this is a disaster? I'd assume this would be Christmas--Best day of the year, for a bank accepting migrating customers!
I think this thread will have tons of views from people in the startup world that are likely to be SVB customers. If we all agree to not do run in the bank, it will improve chances for SVB to make it through the next few days. I'll start with committing not to withdraw money my company [redacted] holds in the bank. We stand by SVB. I invite others to do the same.
I wouldn't share my company name in this context.
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> The bonds they have aren't temporarily worth less because nobody wants to buy them, the bonds are liquid and have a fair market value based on the current interest rate environment. Maybe I’m missing something but couldn’t you just potentially wait for the bonds to mature?
From what I understand, for this method to become profitable (or even reasonably close) the interest rates have to drop down to where they were when the bonds were purchased. Otherwise the bond yields will never be worth it and the price of the bond(s) continue to stay lower than what they were purchased for. These bonds were most likely purchased when interest rates were near 0 and I don't think anyone is banking on…
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From what I understand, for this method to become profitable (or even reasonably close) the interest rates have to drop down to where they were when the bonds were purchased. Otherwise the bond yields will never be worth it and the price of the bond(s) continue to stay lower than what they were purchased for. These bonds were most likely purchased when interest rates were near 0 and I don't think anyone is banking on…
Stupid question but why were they buying bonds when interest rated was near 0? Were they betting on negative interest rates?
That 1.x% on that huge amount would be over $1 Billion per year.
It's a mismatch in terms of the duration, ie your depositors can ask for their money back at any time but the bonds don't mature for many years, but as long as the deposits are kept there the bank can get away with it.
The succinct answer is: Greed.
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You keep referring to this 40% number and calling it a "significant discount", when in actuality it's only a 7-8% decrease in asset value that would be needed to wipe out shareholders ($211B assets vs $195B liabilities on their latest balance sheet). In your original comment you mention the bank selling assets at a 8.5% discount as a point _in favor_ of your thesis. You seem to not only be missing the contradiction t…
The 40% number was the calculation I did off Total Equity. I accidentally mentioned a discount to assets once, but that was it. I did mention the 7-8% off some of their assets . It is in favor of my thesis because the valuation included that and was still far below the value with the 8% included in it. It didn't go empirically wrong an hour later -- that is factually false. What happened an hour late is the bank went…
Disclaimer: I know next to nothing about the financial system or banking inside baseball. This is just one founder's reaction to the whole mess. We were reluctant to move our funds most of the day yesterday. Felt like a lot of dumb panic. We had emails from a few investors, most saying "stay calm" but one saying "move your money to this bank that I'm invested in!" ugh. We decided near the end of the day to move at le…
https://techcrunch.com/2023/03/13/in-historic-last-minute-de...
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Stupid question but why were they buying bonds when interest rated was near 0? Were they betting on negative interest rates?
Short-term rates were near 0, but Long-term rates were 1.x%, which doesn't sound like much but keep in mind they bought tens of billions of dollars of these bonds. That 1.x% on that huge amount would be over $1 Billion per year. It's a mismatch in terms of the duration, ie your depositors can ask for their money back at any time but the bonds don't mature for many years, but as long as the deposits are kept there the…
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What could possibly go wrong running a bank by working with the most volatile companies on Earth with failure rates above 90% lol.
The financial stability of the depositors had ~0 to do with this situation.